Is IBM Still a Winner?

With shares of International Business Machines Corporation (NYSE:IBM) trading at around $207.62, is IBM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

IBM dominates in many different areas, including software, services, and hardware. Diversification, innovation, and superb management have been the keys to its success. But when you’re at the top, others will do their best to knock you off your pedestal.

Oracle Corporation (NASDAQ:ORCL) has been trying its best to steal market share from IBM. However, IBM has treated Oracle like an inflatable punching bag. Oracle is relentless and always comes back for more, but IBM will throw a punch to knock Oracle back down. This pattern then begins again.

This rivalry has been intense over the past few years. It has included potential infringements as well as forced ad pulls. The most recent development has been Oracle stating that its SPARC servers are faster and more affordable than IBM servers. IBM basically referred to this as hogwash.

Both IBM and Oracle are well-run and successful companies. Instead of forming an opinion on which is a better company, let’s simply look at some comparative numbers. The chart below compares basic fundamentals for IBM, Accenture (NYSE:ACN), and Oracle. IBM has a market cap of $233.39 billion, Accenture has a market cap of $49.57 billion, and Oracle has a market cap of $150.88 billion.

IBM

ACN

ORCL

Trailing P/E

14.57

17.78

14.91

Forward P/E

11.35

16.33

10.93

Profit Margin

15.89%

10.85%

28.46%

ROE

84.67%

61.32%

24.29%

Operating Cash Flow

$19.59 Billion

$3.45 Billion

$13.72 Billion

Dividend Yield

1.60%

2.10%

0.70%

Short Position

1.40%

1.10%

1.20%

Overall, it looks as though IBM and Oracle are pretty even on a fundamental basis – they’re both strong. Let’s take a look at some more important numbers prior to forming an opinion on IBM.